Can an external USB drive connected to Windows XP be accessed from a Windows 7 computer on the network?

Yes. It is possible.
Using the following elements I was able to access a USB drive connected to Windows XP x32bit.

• Windows XP x32 bit Toshiba Satellite [Toshiba-Michiko]
• Windows 7 Ultimate x64 bit Toshiba Satellite P775 [HodentekWin7]
• Linksys Router

The Windows 7 is on Wi-Fi off the same router. Windows XP has the Lan Connection
These are the steps taken to access:
1. You need to share the hard drive and the connected drive (in my case it is a FreeAgent GoFlex drive) of the XP. Allow sharing files/folders on both C: and connected drive

2. You should allow incoming connections to XP (Firewall settings)

3. Verify connectivity by pinging each computer from the other.

4. Now you can access the files on the connected drive

 

Also review this link:

https://superuser.com/questions/510332/using-xp-cant-access-other-shared-folders-in-win-7/724686#724686

Mahalo